The Economic Impact of a U.S. Slowdown on the Americas

This paper shows that the U.S.’ biggest trading partners in the Americas will likely see a significant loss in exports and GDP as the U.S. economy slows. Countries less reliant on the U.S. market will not be as negatively impacted.

The paper makes two sets of projections for the decline in exports countries in the Americas may experience. The low-adjustment scenario assumes that the U.S. trade deficit falls from 5.2 percent of GDP in 2007 to 3.0 percent of GDP in 2010. The high adjustment scenario assumes that the U.S. trade deficit falls back to 1.0 percent of GDP by 2010. The paper finds that the countries that will likely suffer most as the result of a reduction in U.S. imports are the same countries with which the United States has implemented “free trade” agreements in recent decades, including the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico, and the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA), which includes the United States along with Guatemala, El Salvador, Costa Rica, Nicaragua, Honduras, and the Dominican Republic. Meanwhile, countries that are less dependent on the United States, or more reliant on domestic demand, will see smaller impacts of the U.S. recession on their exports and national GDP.